As known, checks are negotiable instruments drawn against deposited funds that order a bank to pay a specified amount of money to a specified person on demand. Check collection, or “check clearing,” facilitates payment by moving checks from the banks where the checks are deposited (“Receiving Banks”) to the banks on whose accounts the checks are drawn (“Paying Banks”), and then moving the payment in the opposite direction. This process credits accounts at the Receiving Bank and debits accounts at the Paying Bank. The Federal Reserve participates in check clearing through its nationwide facilities, but many checks are cleared by private sector arrangement.
The passing of the Check Clearing for the 21st Century Act (“Check 21”) by Congress allowed recipients of paper checks to create a digital version of the paper check called an Image Replacement Document (“IRD”). Under Check 21, IRDs, officially named “Substitute Checks,” became a legal substitute for original paper checks. The IRDs include front and back images of the original check, together with other data presented by the magnetic ink character recognition (MICR) line along the bottom of the IRD, where such other data typically includes the routing and transit numbers, the check-writer's account number, and/or the dollar amount of the check.
Businesses and banks can work strictly with IRDs, transfer paper copies to IRDs, or in some cases use paper copies of the IRDs when exchanging the files between member banks, savings and loans, credit unions, services, clearinghouses, and the Federal Reserve Bank (“FED”). Additionally, a process known as “remote deposit” allows customers to upload the digital images of checks to the depositing institution directly, in order to get their account instantly credited, such as through electronic deposit of checks through an Automated Teller Machine (ATM). Some banks don't have the ability to create or process digital images. In such cases, third-party companies offer image processing services to these banks. The advent of Check 21 has greatly reduced check processing costs for banks, while speeding up the fund transfers.
The system of sending check images relies on the timely distribution and accurate evaluation of images captured from paper or via file from partners through the electronic processing of electronic images of checks, image cash letters, or other negotiable item images. Cash letters are groups of checks or potentially other negotiable instruments packaged and sent by a bank to another bank, clearinghouse, or Federal Reserve office. A cash letter is accompanied by a list containing the dollar amount of each check in the cash letter, the total number of checks in the cash letter, and the total dollar amount of all the checks in the cash letter. The cash letter may also include instructions for transmitting the groups of checks or other negotiable instruments to other banks or businesses.
Unfortunately, there are gaps throughout the check image sending process whereby image files can reach a failure point and never make it through to the distribution application and subsequently, their final destination. Currently there is no end-to-end monitoring system of the send processing stream whereby quality degradation or late processing of files can be accounted for and acted upon prior to impacting float on these files. Therefore, under the current system, it is difficult to monitor the outgoing electronic files and their associated images for uncollected, failed or mishandled image files, including checks, cash letters, and credits, from the point of capture through to distribution to the send partners in order to properly identify problems, fix the problems, and process the file flow prior to the problem impacting the bank's customers. The need exists for a system that allows banks or other financial institutions to monitor image checks, cash letters, and associated credits captured by the receiving bank or other financial institution and then sent to the send partners, including other receiving banks, intermediary banks, the Federal Reserve, and paying banks, in order to safeguard the image send process and protect the customer experience.